United States v. Arun Sharma , 703 F.3d 318 ( 2012 )

Case: 11-20102 Document: 00512091609 Page: 1 Date Filed: 12/20/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 20, 2012
Nos. 11-20102, 11-20167, 11-20204 Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA
Plaintiff–Appellee
v.
ARUN SHARMA, KIRAN SHARMA
Defendants–Appellants
Appeals from the United States District Court
for the Southern District of Texas
Before WIENER, CLEMENT, and PRADO, Circuit Judges.
WIENER, Circuit Judge:
Defendants–Appellants Dr. Arun Sharma (“Arun”) and Dr. Kiran Sharma
(“Kiran”) pleaded guilty to defrauding health-care insurers by billing for pain
injections that they never administered. As part of their sentences, the district
court ordered them to pay $43,318,170.93 in restitution to thirty-two victims
defrauded by the scheme, viz., Medicare, Medicaid, and thirty private insurers.
The Sharmas appeal the amount of restitution, contending that it exceeds the
insurers’ actual losses. Arun also claims that the government breached his plea
agreement.
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I. Facts & Proceedings
Arun and Kiran are physicians married to each other who operated two
pain management, arthritis, and allergy clinics in Houston, Texas. From 1998
to 2009, they conspired to defraud Medicare, Medicaid, and many private
insurance companies of millions of dollars by billing for paravertebral facet-point
injections that they never administered to patients. Sometimes, the Sharmas
would actually administer a cheaper, faster, “trigger-point injection” but would
“upcode” the procedure and bill insurers for the more expensive facet-point
injection. Other times, the Sharmas would submit “phantom” bills for injections
or patient visits that never happened.
The Sharmas were indicted on sixty-four counts of conspiracy, health-care
fraud, mail fraud, unlawful distribution of controlled substances, and money
laundering. Eventually, each pleaded guilty to (1) one count of conspiracy to
commit health-care and mail fraud and (2) one substantive count of health-care
fraud, in violation of 18 U.S.C. § 1347. The counts of conviction related to the
injection-billing fraud but not to any other charged conduct, such as unlawful
distribution of controlled substances. In their plea agreements, the Sharmas
agreed to pay restitution to the insurer victims in an amount to be set by the
district court. They also agreed to specified forfeitures, including a money
judgment to be rendered by the sentencing court in the same amount as the
restitution award. Finally, the government agreed to place $1,500,000 of the
seized funds in an educational trust for the benefit of the Sharmas’ son.1
The United States Probation Office (“Probation Office”) prepared
Presentence Investigation Reports (“PSRs”) for both defendants. The PSRs
1
The plea agreements also contained appeal waivers. At oral argument, the
government conceded that the waivers do not bar this appeal of restitution orders that
purportedly exceed the statutory maximum authorized by the Mandatory Victim Restitution
Act. See United States v. Chem. & Metal Indus., Inc., 677 F.3d 750, 752 (5th Cir. 2012).
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calculated that the actual loss to Medicare, Medicaid, and thirty private insurers
totaled $43,318,170.93, and recommended restitution in that amount. The
Sharmas objected, primarily because the recommendation did not give them a
credit for amounts that the insurers would have paid for the trigger-point
injections that were actually administered. They also objected that the
$43,318,170.93 total overstated the insurers’ actual losses because it improperly
included payments for non-injection treatments unrelated to the Sharmas’
specific offenses of conviction, such as Kiran’s undisputedly legitimate allergy
practice and treatments other than by injection.
In support of their objections, the Sharmas submitted an alternative
restitution calculation prepared by a forensic accountant. According to her
report, their accountant first scrutinized the insurers’ claimed losses to exclude
payments for procedures other than injections, reducing the total loss to
$37,670,826.32. The accountant then assumed that the Sharmas had
administered a specific number of legitimate, medically necessary trigger-point
injections each month and that the insurers would have paid for those
procedures without the “upcoding.” Applying a credit for those injections, the
accountant concluded that the actual loss to the insurers totaled $21,028,963.61.
At sentencing, the district court heard arguments regarding the amount
of restitution and the Sharmas’ entitlement to credit for the medical services
actually provided. The district court overruled the Sharmas’ objections and
ordered restitution in the amount of $43,318,170.93, the exact amount
recommended in the PSRs.
The Sharmas timely appealed, challenging the amount of restitution
ordered by the district court. In addition, Arun contends that the government
breached the plea agreement by pursuing forfeiture of particular assets and by
opposing a credit to the restitution award for legitimate charges.
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II. Analysis
A. Standards of Review
We review the quantum of an award of restitution for abuse of discretion.2
We review the district court’s factual findings for clear error.3 A factual finding
is clearly erroneous only if “based on the record as a whole, we are left with the
definite and firm conviction that a mistake has been committed.”4 We may
affirm in the absence of express findings “if the record provides an adequate
basis to support the restitution order.”5
As Arun did not articulate breach of the plea agreement to the district
court, we review that claim for plain error.6 To show plain error, he must
demonstrate that the error was clear or obvious and affected his substantial
rights.7 “Even if he meets this tough standard, we will not reverse unless the
error has a serious effect on the fairness, integrity, or public reputation of
judicial proceedings.”8
B. Restitution
The district court awarded restitution pursuant to the Mandatory Victim
Restitution Act (“MVRA”).9 The MVRA authorizes restitution to a victim
2
See United States v. Mann, 493 F.3d 484, 498 (5th Cir. 2007).
3
United States v. Beydoun, 469 F.3d 102, 107 (5th Cir. 2006).
4
E.g., United States v. Teel, 691 F.3d 578, 585 (5th Cir. 2012) (internal quotation marks
omitted).
5
United States v. Blocker, 104 F.3d 720, 737 (5th Cir. 1997).
6
See United States v. Hebron, 684 F.3d 554, 557-58 (5th Cir. 2012) (“[W]ithout a specific
objection alerting the district court that the government has breached the plea agreement, the
error is not preserved.”).
7
E.g., United States v. Barlow, 568 F.3d 215, 219 (5th Cir. 2009).
8
Id. (internal quotation marks omitted).
9
18 U.S.C. § 3663A.
4
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“directly and proximately harmed” by a defendant’s offense of conviction.10 The
purpose of restitution under the MVRA is to compensate victims for losses, not
to punish defendants for ill-gotten gains.11 An award of restitution greater than
a victim’s actual loss exceeds the MVRA’s statutory maximum.12
The Sharmas contend on appeal, as they did in the district court, that the
total restitution awarded exceeded the aggregate amount of the insurers’ actual
loss by erroneously (1) including restitution for payments not related to the
injection-billing fraud and (2) failing to give credit for amounts that the insurers
would have paid for the less expensive injections that were actually
administered. We address each of the contentions in turn.
1. Actual Loss Caused by the Offenses of Conviction
The MVRA limits restitution to the actual loss directly and proximately
caused by the defendant’s offense of conviction. An award of restitution cannot
compensate a victim for losses caused by conduct not charged in the indictment
or specified in a guilty plea,13 or for losses caused by conduct that falls outside
the temporal scope of the acts of conviction.14 Moreover, excessive restitution
10
18 U.S.C. § 3663A(a)(1), (a)(2), (c)(1); see also United States v. Arledge, 553 F.3d 881,
898 (5th Cir. 2008).
11
See Beydoun, 469 F.3d at 108; see also United States v. Taylor, 582 F.3d 558, 565-66
(5th Cir. 2009).
12
See Chem. & Metal Indus., 677 F.3d at 752; Beydoun, 469 F.3d at 107.
13
See United States v. Hinojosa, 484 F.3d 337, 343 (5th Cir. 2007) (vacating order of
restitution that included losses caused by uncharged fraud that was “outside the scope of the
indictment and inconsistent with the understanding of the parties to the oral plea”).
14
See United States v. Inman, 411 F.3d 591, 595 (5th Cir. 2005) (vacating excessive
restitution award that included losses falling outside the “specific temporal scope of the
indictment”) (emphasis in original).
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awards cannot be excused by harmless error; every dollar must be supported by
record evidence.15
The Sharmas insist that the district court erred by awarding restitution
for losses not caused by their offenses of conviction. They pleaded guilty to only
two of the sixty-four counts of indictment, and both of those counts related to the
scheme to bill insurers between 1998 and 2009 for facet-point injections that
were never administered. Amounts that the insurers paid the Sharmas between
1998 and 2009 for those non-administered injections are actual losses properly
compensable through restitution. Not so, however, for amounts paid by the
insurers before 1998 or paid by them between 1998 and 2009 for unrelated
treatments. Those payments do not constitute losses directly and proximately
caused by the offenses of conviction and should not have been included in
calculating the restitution award.
The district court adopted the precise amount from the PSRs, which it
could do only if those amounts had an adequate evidentiary basis and remained
unrebutted by the defendants.16 In preparing the Sharmas’ PSRs, the Probation
Office apparently relied on statements from the insurers themselves. The
government solicited information regarding “any financial losses and/or harm
experienced as a result of” the Sharmas’ billing for injections that were not
administered. Medicare, Medicaid, and thirty of the private insurers responded
with “victim impact statements” claiming losses from the fraud. For Medicare,
Medicaid, and twenty-eight of the thirty defrauded private insurers, the
Probation Office copied the claimed losses directly into the PSRs.17
15
See Arledge, 553 F.3d at 899 (vacating restitution award because less than 1% of the
total was not supported by evidence of causation by fraud).
16
See United States v. Cantu-Ramirez, 669 F.3d 619, 629 (5th Cir. 2012).
17
For the remaining two insurers, the PSRs recommended different amounts than the
losses claimed in the victim impact statement, but the record is silent as to this discrepancy.
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By thus directly incorporating the amounts from the victim impact
statements into the PSRs as actual losses, the Probation Office went astray.
Examples from three of the insurers will suffice to show how the Probation
Office failed to scrutinize those amounts and thereby recommended restitution
for more than the insurers’ actual losses. One insurer, Tricare, claimed as loss
all of its payments to the Sharmas dating back to 1997. Inasmuch as the
charged conspiracy did not begin until 1998, however, the 1997 payments plainly
do not constitute actual losses under the MVRA.18 A second insurer, Texas
Amerigroup, reported that it paid the Sharmas $650,775.01 for injections, out
of a total of $929,884.55 paid to them for all treatments. Yet the Probation
Office listed the larger figure, the one for total payments, as actual loss instead
of listing only the lesser amount that the insurer paid for injections. This too
overstates the insurer’s loss by including payments not caused by the specific
convictions.19 A third insurer, Principal Life Insurance, attached a spreadsheet
of all of its payments to the Sharmas, but expressly stated that it was “not sure
which claims relate to the guilty plea.” The Probation Office nevertheless
reported all of those payments as actual loss. We find no independent basis in
the record on which the PSRs could have concluded that the entire amount
related to the guilty pleas when the insurer itself stated that it did not know.20
These three errors in confecting the PSRs resulted in recommendations of
restitution to Tricare, Texas Amerigroup, and Principal Life that exceeded the
evidence of their actual losses under the MVRA. Moreover, these obvious
mistakes undermine our confidence that the Probation Office gave any
meaningful scrutiny to the actual losses of Medicare, Medicaid, and the
18
See Inman, 411 F.3d at 595.
19
See Hinojosa, 484 F.3d at 343.
20
See Arledge, 553 F.3d at 898-99.
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remaining twenty-seven private insurer victims.21 Our doubts are compounded
by the Sharmas’ rebuttal evidence. Their accountant examined the insurers’
claimed losses and concluded that, by failing to exclude non-injection payments,
the PSRs overstated the loss by $5,647,344.61.
In sum, the record does not support the entire $43,318,170.93 of
restitution recommended in the PSRs and awarded by the district court. The
Sharmas identified this deficiency to the district court, but it did not address
those objections and instead adopted the unsupported figure. This was an abuse
of discretion.22
2. Credit for Medical Services Actually Provided
Actual loss also must not include compensation for that which would have
occurred in the absence of the crime. Thus, in health-care fraud cases, an
insurer’s actual loss for restitution purposes must not include any amount that
the insurer would have paid had the defendant not committed the fraud. For
example, in United States v. Klein, the defendant physician was convicted of
billing insurers for personally administering three shots to his patients, when
in fact each patient self-administered two of the three shots at home.23 The
district court awarded restitution in the entire amount that the insurers paid the
21
To be clear, we are not criticizing the use of victim impact statements. The
government may properly solicit them, and the district court may rely on them as an
evidentiary basis for an award of restitution that complies with the standards of the MVRA.
But if a dispute arises, the court must determine by a preponderance of the evidence whether
the statements actually support the quantum of an award of restitution. The error here was
the unquestioning reliance on the statements, first by Probation and second by the sentencing
court.
22
“‘[A]buse of discretion’ is a phrase which ‘sounds worse than it really is.’” Smith Int’l,
Inc. v. Tex. Commerce Bank, 844 F.2d 1193, 1199 n.3 (5th Cir. 1988) (citation omitted). “It is
simply a legal term of art which, properly understood, carries no pejorative connotations of a
professional or personal nature.” Id.; see also Sam’s Style Shop v. Cosmos Broad. Corp., 694
F.2d 998, 1007 n.21 (5th Cir. 1982) (“The term ‘abuse of discretion’ is unfortunate, for it has
no pejorative content.”).
23
543 F.3d 206, 208-09 (5th Cir. 2008).
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defendant for the two self-administered shots, including the cost of the
medication itself as well as the amount the defendant charged for administering
it.24 But this overstated the insurers’ losses: Even though the doctor
fraudulently misrepresented how the medication was administered, “the
insurance companies would have had to pay for the medications regardless of the
fraud.”25 We therefore vacated the restitution award and remanded for
recalculation with a credit for the value of the medication.26
In contrast, no credit was warranted in United States v. Jones when the
defendants billed Medicare for providing physical rehabilitation services, but
fraudulently misrepresented the qualifications of the personnel who performed
the work.27 The district court awarded restitution to Medicare for the total
amount it paid to the defendants, without giving any credit for the value of the
physical therapy that was actually provided.28 We affirmed because, although
the patients may have received some therapeutic benefit, Medicare itself–not the
patients–was the victim of the fraud and would not have paid for any of the
treatment absent those fraudulent misrepresentations.29
In the instant case, the parties dispute whether this situation is closer to
Klein or to Jones. The Sharmas assert that, like the defendant in Klein, they
provided real medical services for which the insurers would have paid in the
24
Id. at 215.
25
Id.
26
Id. at 213, 215-16.
27
664 F.3d 966, 970, 977 (5th Cir. 2011).
28
See id. at 972-73, 984.
29
Id. at 984. Jones discussed the applicability of a credit in the context of actual loss
calculation for sentencing purposes under the Guidelines, but the reasoning applies equally
to restitution, which the court awarded in the same amount. See id. at 972-73, 984.
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absence of the fraudulent upcoding.30 The government contends that this case
is closer to Jones because, notwithstanding any pain relief that the patients
might have received, nothing in the record suggests that the insurers would have
paid for the medically unnecessary trigger-point injections.
Even though the MVRA puts the burden on the government to
demonstrate the amount of a victim’s loss, a sentencing court may shift “the
burden of demonstrating such other matters as the court deems appropriate ...
[to] the party designated by the court as justice requires.”31 In the past, we have
approved the transfer of at least a portion of the burden to a defendant to
establish his entitlement to a restitution credit. In United States v. Loe, for
example, we affirmed a district court’s rejection of a restitution credit on the
basis of the defendant’s inability “to provide reliable evidence supporting its
claims” that not all of its insurance claims were fraudulent.32 Similarly, in
United States v. Sheinbaum, we stated that the defendant had “the burden of
proving an offset” to restitution for any amounts it paid the victim in a civil
settlement.33 And, in the unpublished opinion of United States v. Edet, another
health-care fraud case, we affirmed a restitution award that did not credit the
value of wheelchairs actually provided to patients because the defendant did not
offer any evidence that Medicare would have paid for the wheelchairs in the
absence of the fraud.34 With that precedent in mind, we examine the instant
record.
30
The Sharmas acknowledge that they are not entitled to credit for “phantom” bills
based on nonexistent visits.
31
18 U.S.C. § 3664(e).
32
248 F.3d 449, 470 (5th Cir. 2001).
33
136 F.3d 443, 449 (5th Cir. 1998).
34
No. 08-10287, 2009 WL 552123, at *3 (5th Cir. Mar. 5, 2009).
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The government presented unrebutted evidence that Arun (1) deliberately
misdiagnosed patients as having rheumatoid arthritis and put them on an
injection regimen, (2) tried to convince all of his patients to have trigger-point
injections at every visit, (3) required patients who declined injections to sign
mendacious acknowledgments that they had received the treatments before he
would prescribe pain medication, and (4) administered injections in an assembly-
line fashion without taking routine sanitary precautions.35 The Sharmas also
employed six foreign medical graduates to fabricate bills en masse. Finally, the
government asserted in its sentencing memorandum that patients who later
went to different physicians were “universally” taken off trigger-point injections.
The Sharmas offered little in the way of concrete evidence to rebut the
government’s contentions. Their plea agreements stated that some injections
were provided, but did not represent that those injections were medically
necessary or that the physicians would have been reimbursed for them by the
insurers. Although the Sharmas provided anecdotal statements from patients
claiming some degree of pain relief, the victims of the crimes of conviction were
the insurance companies, not the patients.36 The Sharmas did not produce
competent evidence suggesting that even one injection to even one patient was
medically necessary and met the insurer’s reimbursement standards. Instead,
they submitted only the accountant’s report which assumed without explanation
that legitimate and medically necessary injections were performed and would
have been reimbursed. The district court was not required to accept that self-
serving premise.
35
Our decision is limited to these facts. Under other circumstances, the government’s
burden of proving loss might require expert testimony regarding medical necessity or billing
standards.
36
See Jones, 664 F.3d at 984.
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Our review of the record in the context of the burdens of proof satisfies us
that the government provided sufficient evidence that the trigger-point
injections were merely a revenue stream for the Sharmas and not legitimate,
medically necessary treatments for which the insurers would have paid in the
absence of the fraud. The Sharmas did not submit evidence refuting that
conclusion. Accordingly, the district court did not abuse its discretion in
declining to apply a restitution credit.
C. Breach of the Plea Agreement
Arun also contends that the government breached his plea agreement by
(1) opposing the restitution credit discussed above, (2) requesting forfeiture of
the remainder of the educational trust, and (3) requesting forfeiture of funds not
listed in the indictment or in notices of forfeiture. “In evaluating whether a plea
agreement was breached, we apply general principles of contract law, construing
the terms strictly against the government as drafter, to determine whether the
government’s conduct is consistent with the defendant’s reasonable
understanding of the agreement.”37
Assuming without deciding that Arun adequately briefed this issue, none
of the purported breaches are inconsistent with a reasonable understanding of
the plea agreement. First, the agreement did not stipulate to a method for
calculating restitution or to a credit for any trigger-point injections.38 In fact, the
government expressly reserved the right to “set forth or dispute sentencing
factors or facts material to sentencing.” Second, the plea agreement did not
address the balance of the $1.5 million educational trust. As the trust contained
seized funds, and Arun agreed to forfeit proceeds of the fraud, he could not
reasonably expect any remainder of the trust to revert to him. Third, although
37
Hebron, 684 F.3d at 558 (internal quotation marks and citation omitted).
38
See id. at 557-58 (finding that Government breached a plea agreement containing an
express agreement as to the range of loss).
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the plea agreement stated that particular properties listed in the indictment and
in forfeiture notices were subject to forfeiture, it did not limit forfeiture to those
listed items or accounts. Rather, Arun agreed categorically “to forfeit whatever
interest [he] has in assets related to this case.” The government did not breach
the plea agreement.
III. Conclusion
The evidence is not sufficient to support the district court’s entire
$43,318,170.93 restitution award. The Sharmas both identified these
deficiencies and provided rebuttal evidence confirming that the PSRs’
recommended restitution amount exceeded the insurers’ actual losses by millions
of dollars. Thus, the district court abused its discretion as a matter of law in
awarding the entire amount recommended in the PSRs. The district court did
not, however, abuse its discretion in declining to allow the Sharmas credit for
injections that were not shown to be medically necessary or reimbursable by the
insurers.
Accordingly, we vacate the order of restitution and remand for
recalculation consistent with this opinion and based solely on evidence already
in the record.39 On remand, the district court must specify, on the record, its
findings and reasons regarding each insurer’s actual loss. And, as the Sharmas’
plea agreements stipulated to a forfeiture money judgment in the same amount
as the restitution award, we also vacate the amount of the forfeiture award and
remand for recalculation.40 Finally, the government did not breach the plea
agreements with the Sharmas.
39
See Arledge, 553 F.3d at 899 (vacating order of restitution and remanding “for a
recalculation of actual loss based upon the evidence in the record”); Beydoun, 469 F.3d at 108
(remanding “to the district court to re-analyze the government’s evidence” and to recalculate
restitution).
40
Our holding has no effect on any other forfeiture sought by the government.
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In summary, we vacate the district court’s order of restitution and order
of forfeiture, and we remand this matter to that court for it to recalculate those
amounts in a manner consistent with this opinion.
VACATED and REMANDED with instructions.
14